Using the capital gain or capital loss worksheet for shares

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This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

End of attention

In example 46 below, Tony uses the indexation method, the discount method and the 'other' method to calculate his capital gain so he can decide which method gives him the best result. To calculate your capital gain when you acquire or dispose of shares, see how to complete the Capital gain or capital loss worksheet (PDF, 127KB).

Remember that if you bought and sold your shares within 12 months, you must use the 'other' method to calculate your capital gain. If you owned your shares for 12 months or more, you may be able to use either the discount method or the indexation method, whichever gives you the better result.

Because each share in a parcel of shares is a separate CGT asset, you can use different methods to work out the amount of any capital gain for shares within a parcel. This may be to your advantage if you have capital losses to apply. See example 12.

Example 46: Using all three methods to calculate a capital gain

On 1 July 1993, Tony bought 10,000 shares in Kimbin Ltd for $2 each. He paid brokerage of $250 and stamp duty of $50.

On 1 July 2014, Kimbin Ltd offered each of its shareholders one right for each four shares owned to acquire shares in the company for $1.80 each. The market value of the shares at the time was $2.50. On 1 August 2014, Tony exercised all rights and paid $1.80 per share.

On 1 December 2014, Tony sold all his shares in Kimbin Ltd for $3.00 each. He incurred brokerage of $500 and stamp duty of $50.

Separate records

Tony has two parcels of shares, those he acquired on 1 July 1993 and those he acquired at the time he exercised all rights, 1 August 2014. He needs to keep separate records for each parcel and apportion the sale brokerage of $500 and stamp duty of $50.

He uses the 'other' method for the 2,500 shares he owned for less than 12 months, as he has no choice:

$7,500 capital proceeds

–

$4,610 cost base

=

$2,890 capital gain

For the 10,000 shares he has owned for more than 12 months, his capital gain using the indexation method would be:

$30,000 capital proceeds

–

$23,257 cost base

=

$6,743 capital gain

This means his net capital gain would be:

$2,890 'other' method

+

$6,743 indexation method

=

$9,633 net capital gain

If Tony uses the discount method instead (assuming he has no capital losses), his capital gain would be:

$30,000

–

$20,740

=

$9,260

He applies the CGT discount of 50%:

$9,260 × 50% = $4,630

This means his net capital gain would be:

$2,890 'other' method

+

$4,630 discount method

=

$7,520 net capital gain

In this case, he would choose the discount method rather than the indexation method, as it gives him the better result (a lower net capital gain).

End of example

Dividend paid by a listed investment company (LIC) that includes LIC capital gain

If an LIC pays a dividend to you that includes an LIC capital gain amount, you may be entitled to an income tax deduction.

You can claim a deduction if:

you are an individual

you were an Australian resident when an LIC paid you a dividend, and

the dividend included an LIC capital gain amount.

The amount of the deduction is 50% of the LIC capital gain amount. The LIC capital gain amount will be shown separately on your dividend statement.

You do not show the LIC capital gain amount at item 18 on your tax return (supplementary section).

Example 47: LIC capital gain

Ben, an Australian resident, was a shareholder in XYZ Ltd, a LIC. For the 2014–15 income year, Ben received a fully franked dividend from XYZ Ltd of $70,000 including an LIC capital gain amount of $50,000. Ben includes on his tax return the following amounts:

Franked dividend (written at T item 11 in his tax return)

$70,000

plus franking credit (written at U item 11 in his tax return)

$30,000

$100,000

less 50% deduction for LIC capital gain (shown as a deduction at item D8 on his tax return)

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